Examination of witnesses (Questions 260 - 279)
WEDNESDAY 28 OCTOBER 1998
MR GABS
MAKHLOUF, MR
TONY ORHNIAL,
MR GEORGE
ROWING and MS
SUE WALSH
260. The second circumstance of changing
job: implicit in what you are saying is that the new employer
will be paying the old rate that has been assessed of Working
Families Tax Credit or do you completely reapply, or what?
(Mr Rowing) The award is a 26-week award.
261. Exactly.
(Mr Rowing) But what we cannot say is if there
is a new employer whether that employer will be doing anything.
That is part of the administration that we have not finally worked
out and which is not in the public domain.
262. First of all, if you have got more
pay, you might be entitled to less and if you have got less, you
might be entitled to more——
(Mr Rowing) No, it is a fixed award.
263. It is fixed, that is what I mean, so
is there not rather an incentive because six months is quite a
long period of time and there is no flexibility on that front,
so people may suffer disincentives to move or, at least if they
are sensible, they will try to move to coincide the six-month
periods.
(Mr Orhnial) It is no more an incentive or disincentive
than at present because what we are doing is modelling it on Family
Credit, so we have adopted, and I think that was one of your recommendations
in fact, the 26-week fixed-term award, so there is no change in
incentives as far as that is concerned.
264. Finally, and it is going into the next
subject, but what about the negative side of things in terms of
are you expecting employers in some way to provide the policeman
role that the DSS has provided in the past as to the bona fides
of people claiming the entitlements that they are claiming? What
role is the employer going to have there?
(Mr Orhnial) The employer currently has a role
in filling in forms that are sent to verify wages and that role
will continue.
265. Sure, but in terms of whether there
are couples living together and so forth and whether claims are
correct, the employer is not——
(Mr Orhnial) That is nothing to do with the employer.
The employer is not involved in the assessment process at all
any more than now in providing that kind of information.
266. How is the Revenue expected to get
that information? Will it be collaborating with the DSS?
(Ms Walsh) It is broadly the same way as it happens
now. What happens now with Family Credit is that a claimant completes
a claim form, it goes to the Family Credit Unit who assess that
claim form and determine the amount of the claim. In a similar
way, when the Family Credit Unit becomes a part of the Inland
Revenue, there will be claim forms that will come to the Unit
and they will assess them and determine the claim, so what will
happen is that they will simply tell the employer that X is to
be paid this amount.
Ms Buck
267. I was a little bit concerned, if you
do not mind my saying, at your response to the question about
how enquiries will be dealt with. We want this to work and it
will work with this client group if people are given confidence
and security before they enter work and feel confident and secure
into employment, and I have no doubt in my mind that this new
system which has huge advantages to it, nonetheless, carries with
it an in-built sense of greater insecurity, that people are more
anxious about a system that is employer and Inland Revenue-driven
than anything through the benefits system, so I think an answer
that almost seems to imply, setting aside perhaps those people
who are coming through the New Deal, that people will be getting
their information and dealing with their queries through a combination
of leaflets on the one hand and calls to their local tax office
on the other is really way, way, way out of line with what we
need to be doing at this moment.
(Ms Walsh) They were just some examples of what
would happen. First of all, there is already the existing system
which is there, which is that there is a Family Credit Unit and
a help-line and that will be an Inland Revenue Unit with a help-line,
and I know Members went up and had a look at that help-line, and
that help-line is used constantly and consistently by people seeking
advice. That will be there. There are a range of other ways in
which we can actually help people. Again I cannot give you the
detail of that yet because we are still looking and understanding
the audiences.
268. Fine, but particularly as we are talking
about a substantial additional number of people in this scheme,
even more than Family Credit, a help-line is fine for a certain
tier of people who have got one specific enquiry and they want
to deal with it, but what I am concerned about is that group of
people who are the most vulnerable, the ones we actually most
want to help who have the most difficulty with comprehending the
entire package and all its details for whom a proper in-work calculation,
a devoted hour or two to working out their situation is absolutely
critical. What I am looking for, and you will not be able to say
it now, but what I would want is a commitment that one of your
options would be a substantial chunk of resources going into,
for example, the network of advice centres to greatly expand our
capacity to provide serious time with those clients to make a
proper in-work benefit assessment. I appreciate that the New Deal
and the Employment Service offer some people that, but we know
most people do not find their jobs through the Employment Service
and that is not going to change. That is the kind of thing I would
like to see. I want a real recognition that most of these enquiries
are amongst the people who are the most problematic and need most
help and they need that kind of very personalised attention.
(Ms Walsh) I recognise your point absolutely and
that is certainly one of the things we are considering in looking
at how we can provide that.
269. Can I just ask a second question on
incentives to work. One of the things I get most commonly as an
MP discussing this and going around offices is the lack of recognition
that officialdom gives and the great concern they feel as individual
complainants about passported benefits. Can you just tell me now
what exactly is the current thinking about passported benefits
in relation to the new tax credits and particularly how that applies
to people in part-time work and whether that is going to be carried
over in exactly the same way as Family Credit?
(Mr Orhnial) I cannot say that it will be carried
over. It is, as you will no doubt know, a matter for the Department
of Health and that is where it rests at present, so we are waiting
for a view on that.
270. How can we deal with this, Chairman,
because I really do think this is a very important point?
(Mr Orhnial) I am sorry, but, forgive me, I misunderstood
your question. I thought you meant passporting on to prescriptions
and that sort of thing.
271. That is what I mean, free school dinners,
which is probably the single most important, prescriptions and
dental care and such like. It comes up again and again and again
where people say, "I am in the middle of a course of dental
treatment and if I take a job, it is going to cost me £400",
which is true, and school dinners where again and again and again
I find that even when people are getting their in-work benefit
assessments in the Employment Service, there is micro-writing
at the bottom saying, "You will not get free school dinners",
which is £11 a week if you have two children. This is really
critical and to make this work, this has got to be so much higher
profile than I think people are taking it at the moment and we
certainly need an early sense for people that at least the kind
of Family Credit passporting arrangements are going to come.
(Mr Orhnial) You will appreciate that there is
a nexus of interests here which all need to have a view on it
and, as I say, on the passporting issue we are waiting the views
of Ministers in other departments.
Chairman
272. Can I reinforce that because on the
whole question of the better off calculation being done, actually
when we were up in Preston, I listened into a very efficient,
and I was very impressed by it, enquiry which came in where the
job situation was described very briefly and a piece of advice
was given, but I wonder if enough is being done to promote that.
I think Karen is absolutely right, that there are layers of passporting
and issues like that, particularly with the complications of part-time
work for the number of hours per week, but I do not get any sense
that the system really is running with this. If this is about
incentives, if this really is to try and drive people, which is
what the Government seem to be saying, there is an element missing
here, it seems to me, in the energy and the effort that is being
put into these kinds of issues, or am I wrong?
(Mr Makhlouf) I hesitate to say that you are wrong,
but I think you are being slightly unfair to say that there is
no recognition by officialdom.
Ms Buck
273. Insufficient.
(Mr Makhlouf) Perhaps we are not bringing it out
that we do recognise, certainly from where I sit at the moment,
that it is very important, and it is very important in the context
of work incentives and encouraging people to see that they will
be better off by moving into work. On the specific point, as Tony
and George said, that is under consideration at the moment, but
it is a point that we are acutely aware of and we do recognise
its importance and in the publicity context and in the communication
context, as Sue said, that is very much an issue that is being
looked at.
Chairman
274. Here is your standard question for
the morning: we know that Family Credit does not bring with it
access to free school meals, but to deal with Karen's point properly,
why do you not go away and work out how much it would cost to
attach free school meals to Working Families Tax Credit? I do
not expect you to have that figure at your fingertips——
(Mr Makhlouf) I do not!
275. ——but will you promise
to go away and do that sum, to find out how much it is and actively
consider making this part of the added value of this benefit because
if you are looking for incentives to work, that might be a very
easy way in terms of promoting the thing?
(Mr Makhlouf) We can certainly go away and look
at what it might cost, if we can work that out.[6]
There is a much wider issue here in terms of extending it, some
of which is outside my own particular area, but certainly, as
I said, if I can just reinforce what I said earlier, it is something
we have not lost sight of.
Ms Buck: There is
just one last sub-clause of this because, for example, if somebody
takes a part-time job, takes a 16-hour-a-week job, very likely
a working mother, there is a risk that in coming off Income Support
she will lose all of her free school dinners, so if she has got
two, perhaps three children, she will lose £15 a week. Now,
there is a question about getting people to passport them completely,
but also there is an issue about passporting, and if she is working
two days a week or three days a week, will she be entitled to
free school dinners for three days a week? If not, there is no
question that she will be paying it herself, I think, and it would
be almost inconceivable that she would not be, so I think there
are several layers to passporting as well.
Chairman: We are going
to have to leave it. I think there are quite a lot of incentives,
but I think that we were less than impressed and there is one
area where I was less than impressed with Mr Taylor's evidence
when we were cross-examining him right at the very beginning of
all of this about what the added value would be in terms of incentive
and it is a psychological hunch, and that is what it came down
to, in that he thought that this would be an incentive for people
to work and I think that perhaps we are losing sight of the incentive,
but we must move on because your time is valuable, as is ours.
We turn immediately now to the particular problems of the self-employed.
Ms Stuart
276. I think we have already explored some
of the issues where we failed to get sufficient information, but
I just have a very precise question. In a written answer it makes
it clear that you do contemplate two ways of paying it, one of
which is directly to a claimant and the other is through the wage
packet. In terms of the self-employed, which appear to be a growing
group which causes considerable aches both to the Benefits Agency,
the CSA and the Inland Revenue for all sorts of reasons, there
is a third option and that is that you could actually deduct the
credit from entitlement for tax due. Is that something you are
actively considering or pursuing?
(Mr Orchnial) That would be very difficult to
do because tax is retrospective and on an annual basis. Now, the
purpose of Family Credit as it is now, and Working Families Tax
Credit in the future, is to try to make sure that people have
money in their pockets in year. To wait until the end of the tax
year in order to net off their Working Families Tax Credit entitlement
would be extremely difficult for claimants and run counter to
the basic incentive in the current structure. This was one of
the issues that we considered was in the context of the American
income tax credit, which is also done on an annual basis and claimed
at the end of the year. So that is a roundabout way of saying
no, that is not an issue.
277. I am delighted to hear that because
not only are there practical problems of the kind in America,
but also there is an issue of the self-employed who may be running
small companies where the income flow is so irregular that the
Family Credit in a sense bought the children's lunches every week
and it was vital that that continued, so I welcome the statement
from you. Dealing with the self-employed and the difficulties
with fraud, I have always found that when you talk to the Benefits
Agency about anti-fraud measures, there is both the culture of
looking at fraud and some mechanisms, but when you deal with the
Inland Revenue, their starting point is whether there is an assessed
income tax liability and if there is not a tax liability against
which to assume fraud, the budgets, which tend to work on a spend
to save, are not geared to this and there is an absence of culture
to pursue fraud which is not on assessed tax liability. Have you
got any concrete plans on how you are going to deal with the self-employed
and potentially fraud in that context?
(Mr Makhlouf) Can I make some general points on
fraud generally which is that the Government takes attacking fraud,
whether it is in the social security system or the tax system,
very seriously indeed and you can rest assured that whether we
are talking about the Working Families Tax Credit or Income Support
or income tax, all of them are of equal importance in finding
ways of tackling them effectively. That is just a general point
I wanted to make.
(Ms Walsh) I accept the point that you made completely.
I think that we are almost in an ideal position in this particular
instance because what we are doing is actually bringing together
the experience of people within the Benefits Agency and the experience
of the Revenue and, by bringing those two together, seeing how
we can best actually monitor and police and ensure the security
of tax credits. Again I am sorry, I am not going to be able to
give you the detail on that, but certainly it is an area, to pick
up on what Gabs said, which we are very concerned about and are
actively working together in both departments to develop something
that is proper for this new business stream.
278. I think it would be very useful if
at some stage you could provide us with more details on this[7]
and I pursued this in a different context when we were looking
at constituency work on travellers and we had meetings with the
Benefits Agency and the Inland Revenue and it was quite clear
that there is this employment going on for which there is no tax
paid and the Inland Revenue kept saying to us, "If there
is no assessed tax liability, we can't deal with this. It is totally
outside our remit", and the only people who could look at
it were the Benefits Agency. Now, I would be deeply disappointed
if in the group of the self-employed, by moving this over to the
Inland Revenue, we again run up against this barrier of being
told, "If there is no tax liability, it is not up to us",
so I would appreciate in the future some evidence of this serious
commitment which I accept you have, but as there is a doubt, I
would like to see some evidence of that.
(Mr Makhlouf) I would be deeply disappointed too.
Chairman: Can we stay
with fraud. We spent some time on our very useful visit to Preston
looking at this issue.
Mr Wicks
279. The Government's Green Paper on fraud,
Beating Fraud isEveryone's Business, published in July
of this year talked about the need "to design and operate
policies and systems which minimise fraud", in other words,
when you are thinking of a new benefit having very much in mind
to design out fraud. Are you doing this?
(Ms Walsh) We are certainly looking very closely
at the current systems and building on, as I said before, the
experience of both departments. I do not think that fraud is actually
designed in as part of the existing Family Credit system and of
course we are building on that. I am not sure quite what you want
me to address.
6 Note by Witness: The most recent estimate
of the cost of extending free school meals to all Family Credit
recipients is £150 million (for 1997/98). The cost of passporting
free school meals to the Working Families Tax Credit would be
higher because of its wider remit and the anticipated increase
in take-up. Back
7
Note by witness: We have nothing to add to the evidence
we gave on this point. It is one of the issues that we will be
building into our planning. Back
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